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A brief history of Social Security benefit claiming goes like this: In the beginning, benefits were available only at age 65. In 1956, reduced benefits were made available to women as early as age 62. In 1961, this treatment extended to men. Over time the age people claimed benefits steadily decreased and the average age for retirement stuck at 62 years old. In 1983, when facing an imminent shortage of funds, the age for full benefits increased from 65 to 67. While this reform did not change the earliest age you could claim Social Security, it reduced benefits further for early claimers. Currently, claiming benefits at age 62 instead of age 67 results in 25 percent less in every monthly check. So, $938 per month rather than $1,250 per month. Get it? Good!

In the past decade, the age of claiming Social Security benefits steadily increased as people began to comprehend how much money they lose by retiring early. That is, until the recent economic recession. A brief from the Center for Retirement Research at Boston College shows a large increase in early benefit claims from 2007 to 2009. More than 5 percent of the eligible population were enticed to claim Social Security at age 62, which was not part of their plan before the crisis. These individuals will now receive a reduced benefit for the rest of their lives.

Simulations by the authors suggest that compared to experiencing no recession, people claimed benefits about 10 months earlier than they planned, which reduced their monthly benefit by 8 percent. This many not seem like much now but every little bit helps when living on a fixed income. Ask an 82-year-old and she may tell you her Social Security check was plenty of income 20 years ago. Now she finds herself struggling to stay out of poverty.

A recent post by the CRR shows that non-working Baby Boomers age 55 to 61 (ages ineligible for Social Security benefits) are wealthier now than non-working 55 to 61 year olds of the past. The post explores how they’ve accumulated the wealth and why they chose to leave the labor force. An important point of the article is that, though they find themselves wealthier than non-workers of the past, they still only have a median wealth figure of $98,000. This “isn’t a lot of money for a boomer with a long spell of retirement ahead of them.  Boomers who leave the labor force often put themselves at risk of depleting their 401(k) assets too soon.”

Full post from the Center for Retirement Research.

Post Introduction: “Baby boomers who’ve left the labor force in their pre-retirement years are in better financial shape than they once were.

The wealth of non-working Americans between ages 55 and 61 increased from $83,000 in 1992 to $98,000 in 2008, according to new research from the Urban Institute in Washington.  (Comparisons are in constant dollars.)

Potential explanations for this trend range from greater U.S. inequality that launched more boomers into the top wealth tier to a rise in the numbers of married men who don’t work – but have wives who do.  Barbara Butrica, a senior research associate at the Urban Institute, said her study did not look into the “why” for the emerging group of voluntary non-workers who are approaching traditional retirement ages, married and single men in particular.  One possibility, she said, is that “they are leaving the labor force because they can afford to.”

…Read the full story

The Older Women’s League has come out with their 2012 Mother’s Day report. Their reports are always thorough, up-to-date, and readable. This year the topic is on women in the U.S. workforce and highlights what women are faced with as they grow older. As OWL’s president mentions in her message to readers, this is a timely report since mid-life and older women are the fastest growing segment of our workforce and the economic downturn presents new challenges in their ability to find work, keep their jobs, and build their retirement wealth.

Women and the Workforce: Challenges and Opportunities Facing Women as They Age

MDR2012

From the OWL National Website: “This year’s report looks at how factors such as unemployment and underemployment, pay inequality, caregiving, age and gender discrimination, and education, training, and technology are impacting women age 40 and older. The report highlights existing programs that produce real results and offer innovative solutions and policy-driven recommendations to expand economic diversity and accelerate our nation’s productivity.”

Today, after listening to the President speak, I started thinking about the economy’s impact on older Americans. I found an interesting report from The National Academies Press titled:  Assessing the Impact of Severe Economic Recession on the Elderly. You can read the document here, which summarizes a workshop called by The National Institute on Aging. The report’s main goal is to reflect on what we already know and what we need to learn about the current recession’s effect on older adults. Unfortunately, what we already know is quite bleak.

How People are Coping: All age groups are being affected by the recession but older workers are often unable to completely recover from these kinds of financial shocks. The most common ways people are coping with income loss are to reduce spending, reduce saving, utilize unemployment benefits, withdraw money from savings, get financial assistance from friends or family, and borrow money (i.e. credit cards, loans). Some older workers are also choosing to delay retirement as an additional coping method.

Our Health and Well-Being: Our health is being negatively effected by the economic recession. GDP is strongly, inversely related to mortality over the long term, and older workers who lose their jobs are at greater risk for certain health conditions than those who remain employed. Still the Gallup Well-Being Index found that people’s well-being significantly declined in the fall of 2008 but went back up substantially by May 2009. I am nervous, now that we lost our AAA rating and the current stock market is in turmoil, if people’s well-being will again decline.

Unemployment or Retirement: Unfortunately, older adults who lose their job are less likely to get hired back into the labor force compared to younger workers. Those who do find work are often making significantly less than they made at their previous job. Researchers find that age discrimination in the workplace continues to exist, particularly for older women. It is therefore not surprising that many older adults who lost their jobs are deciding to retire. This early retirement, however, could hurt future finances. Increases in Social Security’s full retirement age, less time to invest in your retirement accounts, fewer vested years with your employer, or simply having less in wages over your lifetime can all have negative effects on your finances in old age.

What Can You Do: The report summarizes a depressing situation and then has limited suggestions (and most of them seem pretty intuitive to me). I don’t know if it will tell you anything new but here they are along with my own comments:

  • Buy low, sell high – Experts suggest raising your contribution rates (if you can) to your stocks, bonds and pension accounts while the market is doing poorly. If the markets bounce back before you retire you may gain substantially (the younger you are the more you are likely to gain). If you are retired and have spare cash, consider moving it into low-risk funds so that you too may gain from the markets being low (Please consult a financial adviser who will learn about your personal situation. Do not take this as professional advice).
  • Reduce your spending – A no-brainer but often hard to do. Consider what you really need now and what can wait. Did you know that “I don’t need it” is the most common reason eligible individuals refuse welfare? Figure out what you really need, what you can live without, and what is most important to you.
  • Stay in your home – Selling now is not a great idea, so consider modifications if your home is currently not a safe place to grow old.
  • Keep your job – If possible, consider waiting to retire. If you have been laid off, consider looking for new employment and working a few more years before you retire. Collecting your Social Security benefits early will mean a lower monthly paycheck for the rest of your life.
  • Utilize family – Your family may be able to provide some insurance against financial shocks. It’s important to have someone you can call on for help, even if you don’t use them.
The report highlights a ton of questions we need to research before we can understand what is going on. Unfortunately all that means is the recession’s impact on older workers will be understood after it’s all over, providing them little support in the meantime.

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